Knitline Inc. produces high-end sweaters and jackets in a single factory. The following information was provided for the coming year.

	Sweaters	Jackets
Sales	$ 209,000	$ 450,200
Variable cost of goods sold	145,900	196,200
Direct fixed overhead	25,700	45,700

A sales commission of 4% of sales is paid for each of the two product lines. Direct fixed selling and administrative expense was estimated to be $20,000 for the sweater line and $49,900 for the jacket line.

Common fixed overhead for the factory was estimated to be $47,000. Common selling and administrative expense was estimated to be $12,000.

2. Suppose that next year, all revenues and costs are expected to remain the same except for direct fixed overhead expense, which will go up by $9,540 for one of the product lines due to costs related to new equipment. Does it matter which line (sweaters or jackets) requires the new equipment? Why?

Complete the statements below that outline the impact of the overhead expense increase. If an amount is negative, first enter a minus sign (-).

	For the company as a whole, operating income will decrease to . $
	For the sweater line, the segments margin will be . In this case, if profitability is not expected to improve (either by increasing price or decreasing other costs), then the sweater line(s) should be dropped. $
	For the jacket line, the segments margin will be . In this case, if profitability is not expected to improve (either by increasing price or decreasing other costs), then neither of the line(s) should be dropped. $